HIGHWAY TO HAIL

October 01, 2018

A fair and sustainable point-to-point transport industry is more about regulation than competition.

THE quagmire which the Competition and Consumer Commission of Singapore (CCCS) has found itself in with regards to ride-hailing firm Grab’s takeover of rival Uber’s South-east Asian business is not of its own doing.

For the past six months, the CCCS has been trying – with limited success – to get Grab to undo the “lessening of competition” which its acquisition of Uber’s regional operations has apparently given rise to.

The issue, really, is not about whether such a move has led to less competition. The answer to that is pretty obvious. Any drop-out of a competitor will lead to less competition.

The issue is whether it has led to a monopolistic situation. The answer to that is also pretty obvious. It has not. Grab is still facing a fair amount of competition from taxi operators and an ever increasing number of wannabe hailing apps.

One would think the very nature of competition is its perpetual flux. Players come and players go. As long as there is no monopoly, should the CCCS be concerned?

The commission, however, is finding itself in murky waters which should not have been there in the first place. That is, if Singapore had recognised Uber and Grab for what they were at the very start.

They are essentially taxi companies. (Of course, Grab is now trying to position itself in various other industries, but when it arrived here along with Uber in 2013, it was a taxi company.)

And taxi companies should be regulated like taxi companies. After five years, the Land Transport Authority (LTA) is finally recognising that, and has put in place a regulatory framework for ride-hailing firms. It may be too little, too late.

Soon after Grab and Uber arrived here, The Straits Times asked the LTA why they did not have to follow regulations governing the taxi industry. The reply was that they were not taxi companies, but technology companies.

Singapore’s authorities should have recognised Uber and Grab for the taxi companies they were at the very start and treated them as transport providers from day one.

If it had treated these firms as transport providers from day one, the playing field would have been more level, and it is likely that we would not have had to expect the CCCS to do what it is doing now.

Instead, the two newcomers were allowed to grow in an unrestrained manner, with the number of private-hire vehicles hitting 50,000 in just four short years – double the entire fleet of taxis here.

If proper competition is what we are striving for, surely flooding the market with cars should not have been allowed in the first place. After all, the size of the taxi market is tightly controlled, and operators cannot expand in an unbridled way.

Consumers, however, were not complaining. Why should they, when the two ride-hailing firms were fighting tooth and nail for their patronage? Armed with a seemingly unending source of funds, Grab and Uber offered rides for as little as 50 cents.

That was unsustainable, as Uber’s pullout proved. But consumers don’t really care, do they? They want their cheap rides to go on, no matter what.

Regulators everywhere are beginning to see ride-hailing firms for what they are.

Last December, Europe ruled that Uber was a taxi company. Several cities, notably London, have banned Uber altogether.

In August, New York became the first American city to stop issuing new licences for ride- hailing services. New York’s City Council speaker Corey Johnson, quoted by the New York Times, said: “We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation.”

The move came after mounting evidence that the so-called sharing economy which ride-hailing firms purport to be part of was not what it was made out to be. On August 9, the New

York Times cited a study by economists James Parrott and Michael Reich which showed that in New York City, Uber’s largest domestic market, nearly two-thirds of drivers who worked for ride-hailing services did so full-time.

The study also found that these drivers held no other jobs, and about 80% bought cars for the purpose of making a living by driving them. Many were in debt from those acquisitions and making “very little money”. So much for “ride-sharing”.

The rise of ride-hailing cars also had a huge impact on the earnings of drivers as well as cabbies. According to the New York Times article, six professional drivers committed suicide “in the past several months” because they simply could not make ends meet.

In Singapore, easy access to a car has lured several thousand people to sign up as private- hire drivers. Many are finding out that it is not as lucrative as it seems, and are looking for relief drivers to share their lease. Many have turned to touting to supplement their income. The fact that it is illegal and carries hefty penalties reveals their desperation.

Others have returned their private-hire cars, leading to an idle fleet estimated to run into the thousands.

These drivers are also facing competition from the tens of thousands of motorists who have signed up with car-pooling apps. Unlike private-hire drivers who are now regulated, these car-pool drivers are flying completely under the radar. Something has to be done, but it will take more than the CCCS to do it.

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THE LTA HAS PUT IN PLACE A REGULATORY FRAMEWORK FOR RIDE- HAILING FIRMS, BUT IT MAY BE TOO LITTLE, TOO LATE.